Question

Reynolds Construction (RC) needs a piece of equipment that costs $180,000

Reynolds Construction (RC) needs a piece of equipment that costs $180,000. The equipment has an economic life of 3 years and no residual value. The equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 8% with payments due at the end of the year. Alternatively, RC can lease the equipment for $65,000 with payments due at the end of the year. Assume RC chooses the lease, which is a finance lease for financial reporting purposes. Answer the following questions. (Hint: See Table 19-1.)

  1. What is the initial lease liability that must be reported on the balance sheet? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

    $   

  2. What is the initial right-of-use asset? Do not round intermediate calculations. Round your answer to the nearest cent.

    $   

  3. What will RC report as an interest expense at Year 1? Round your answer to the nearest cent. Enter your answer as a positive value.

    $   

  4. What will RC report as an amortization expense at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

    $   

  5. What will RC report as the lease liability at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive value.

    $   

  6. What will RC report as the right-of-use asset at Year 1? Do not round intermediate calculations. Round your answer to the nearest cent.

    $   


0 0
Add a comment Improve this question Transcribed image text
Request Professional Answer

Request Answer!

We need at least 10 more requests to produce the answer.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the answer will be notified once they are available.
Know the answer?
Add Answer to:
Reynolds Construction (RC) needs a piece of equipment that costs $180,000
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
  • eBook Financial Statement Reporting for a Finance Lease Reynolds Construction (RC) needs a piece of equipment...

    eBook Financial Statement Reporting for a Finance Lease Reynolds Construction (RC) needs a piece of equipment that costs $150,000. The equipment has an economic life of 3 years and no residual value. The equipment will not require maintenance because its useful life is so short. RC can borrow the full cost of the equipment at an interest rate of 6% with payments due at the end of the year. Alternatively, RC can lease the equipment for $55,000 with payments due...

  • Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease...

    Rauch Incorporated leases a piece of equipment to Donahue Corporation on January 1, 2020. The lease agreement called for annual rental payments of $4,892 at the beginning of each year of the 4-year lease. The equipment has an economic useful life of 6 years, a fair value of $25,000, a book value of $20,000, and both parties expect a residual value of $8,250 at the end of the lease term, though this amount is not guaranteed. Rauch set the lease...

  • An asset costs $670,000 and will be depreciated in a straight-line manner over its three-year life....

    An asset costs $670,000 and will be depreciated in a straight-line manner over its three-year life. It will have no salvage value. The lessor can borrow at 5 percent and the lessee can borrow at 7.5 percent. The corporate tax rate is 23 percent for both companies. a. What would the lease payment have to be to make both the lessor and lessee indifferent about the lease? (Do not round intermediate calculations and round your answer to 2 decimal places,...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $23,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $198,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $20,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $171,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $29,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $207,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...

  • Laporte Engineering Company leased a machine on January 1, 2017, under a contract calling for four...

    Laporte Engineering Company leased a machine on January 1, 2017, under a contract calling for four annual payments of $150,000 on December 31, 2017 through 2020. The machine becomes the property of the lessee after the fourth payment. The machine was predicted to have a service life of six years and no residual value, and the interest rate available to Laporte Engineering was 10% on the day the lease was signed. The machine was delivered on January 10, 2017, and...

  • At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease...

    At January 1, 2021, Café Med leased restaurant equipment from Crescent Corporation under a nine-year lease agreement. The lease agreement specifies annual payments of $24,000 beginning January 1, 2021, the beginning of the lease, and at each December 31 thereafter through 2028. The equipment was acquired recently by Crescent at a cost of $162,000 (its fair value) and was expected to have a useful life of 12 years with no salvage value at the end of its life. (Because the...

  • The Harris Company is the lessee on a four-year lease with the following payments at the...

    The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: Year 2: Year 3: Year 4: $19,500 $24,500 $29,500 $ 34,500 An appropriate discount rate is 7 percentage, yielding a present value of $90,024. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset a-2. If the lease is an operating lease, what will...

  • The Harris Company is the lessee on a four-year lease with the following payments at the...

    The Harris Company is the lessee on a four-year lease with the following payments at the end of each year: Year 1: Year 2: Year 3: Year 4: $18,000 $23,000 $28,000 $33,000 An appropriate discount rate is 7 percentage, yielding a present value of $84,943. a-1. If the lease is an operating lease, what will be the initial value of the right-of-use asset? Initial value of the right-of-use asset a-2. If the lease is an operating lease, what will be...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT